All markets surge early this morning! The Federal Reserve has made a major announcement!

All-Out Counterattack!

As market trading sentiment gradually stabilizes, overnight U.S. stock markets saw a broad-based rally. Technology stocks jumped across the board, with the Nasdaq up more than 1%. Most popular Chinese concept stocks rose, and European equities also closed higher across the board. Analysts noted that the latest comments by U.S. President Trump and U.S. Treasury Secretary Bessent eased investors’ worries about the oil market. The overnight VIX volatility index fell sharply by more than 10%.

In addition, the Federal Reserve’s interest-rate cut path is also a key focus for the market. In the early hours of March 5 Beijing time, the Fed released its latest edition of the Summary of Commentary on Current Economic Conditions (the “Beige Book”), which showed that overall, expectations for the U.S. economy are optimistic, and most regions expect the economy to post mild to moderate growth over the coming months. However, the Beige Book warned that in many jurisdictions, economic uncertainty is increasing, price sensitivity is rising, and low-income consumers are cutting back spending, suppressing sales performance.

All-Out Counterattack

On March 4 U.S. Eastern Time, all three major U.S. stock indexes closed higher together, with technology stocks leading the rebound. As of the close, the Dow rose 0.49%, the Nasdaq gained 1.29%, and the S&P 500 index climbed 0.78%.

Most large U.S. technology stocks finished higher. Micron Technology and AMD surged more than 5%; Amazon and Tesla jumped more than 3%; Meta rose nearly 2%; Nvidia and Broadcom rose more than 1%; Microsoft closed slightly higher. Apple and Google closed slightly lower.

Popular Chinese concept stocks rallied across the board. The Nasdaq China Golden Dragon Index rose 0.8%, NIO surged 5.5%, Xiaopeng Smart, and WeRide rose more than 4%, New Oriental rose more than 2%, and XPeng Motors and NetEase rose more than 1%.

European equities also closed higher across the board. Spain’s IBEX 35 index closed up more than 2%; Italy’s FTSE MIB index rose nearly 2%; and the STOXX 50 index and Germany’s DAX 30 index rose more than 1%.

On the news front, the Trump administration pledged to stabilize the oil market, to a certain extent easing investors’ concerns about the conflict in the Middle East.

Funds flowed back into the technology sector, lifting the Nasdaq and recovering all of its losses since the U.S. launched strikes against Iran, which reignited tensions in the Middle East. The S&P 500 index, meanwhile, is approaching its all-time record closing level set in January.

Jim Awad, Senior Managing Director at Clearstead Advisors, said that the White House statement lowered the market’s concerns that the oil market could face major supply disruptions. As risk eased and confidence strengthened, investors returned to buying technology stocks that had been heavily sold off in February and whose valuations had become more attractive than a few weeks earlier.

Awad said that this mix of factors has brought a degree of optimism to the market, but the coming weeks will still be a test. Investors need to stay rational—neither overly bullish nor overly pessimistic.

In addition, several strong economic data releases on Wednesday also boosted investor sentiment. First, the ADP report showed that U.S. February ADP employment data rebounded more than expected: new jobs added were 63k, above the market estimate of 50k, and also a sharp rebound from the prior value of 22k. The U.S. non-manufacturing sector also recorded growth better than expected last month, and inflation pressures eased somewhat.

Richard Bernstein Advisors’ CEO Richard Bernstein said that if the market believes this war will be short-term, or has limited impact on the U.S. economy, the stock market is likely to keep rebounding. Conversely, if the conflict drags on and creates a material shock to the U.S. economy, market volatility may further intensify.

The Fed’s Major Report Released

In the early hours of March 5 Beijing time, the Fed released its latest edition of the Beige Book. It showed that in recent weeks, economic activity in most areas of the United States has been growing at a mild to moderate pace. However, an increasing number of regions reported that economic activity has been flat or declining. Overall, economic activity grew at a mild to moderate pace in seven of the 12 Federal Reserve districts. The number of districts reporting activity was flat or declining rose from four in the prior report to five in the current report.

The Beige Book summarizes the results of initial assessments of the U.S. economic situation from 12 regional Federal Reserve banks. The report is an important reference for the Fed’s monetary policy meetings. Fed officials will hold the next interest-rate meeting on June 17-18.

Compiled by the Cleveland Fed based on information available through February 23, the timing came before the U.S. strike on Iran, which reignited Middle East tensions and drove oil prices sharply higher.

The Fed said that although consumer spending increased slightly overall, two Federal Reserve districts reported continued declines. In many districts, economic uncertainty has increased, price sensitivity has risen, and low-income consumers have cut spending, restraining sales performance. Reserve districts affected by winter storms said retail foot traffic generally slowed; one Federal Reserve district added that immigration enforcement activities negatively affected demand from customers in urban areas.

The Beige Book said that employment levels have remained broadly stable, even as businesses seek to use artificial intelligence to improve efficiency. In some districts and across multiple industries, businesses have begun adopting artificial intelligence or other forms of automation to improve efficiency. Most firms emphasized that the goal is to increase productivity rather than replace employees.

The Beige Book showed that among the Fed’s 12 districts, eight reported inflation at a mild level. Overall, businesses expect the pace of price increases to slow somewhat in the near term. Most regions’ firms said wages are rising at a mild or moderate pace; meanwhile, some districts also reported that overall compensation faces upward pressure due to rising health insurance costs.

The U.S. Department of Labor will release the February nonfarm payroll employment report this Friday. Officials will also receive the latest inflation data next week. Federal Reserve policymakers will meet again in Washington on March 17-18.

According to CME “FedWatch,” as of the time of publication, the probability that the Fed will cut rates by 25 basis points by March is 2.7%, while the probability of keeping rates unchanged is 97.3%. The probability that the Fed will cumulatively cut by 25 basis points by April is 12.5%.